Category Archives: Licensing

Medtronic v. Mirowski Family Ventures: Supreme Court decision affects patent license disputes

A recent Supreme Court decision may prompt patent holders to review license agreements and build in extra protections against actions filed by their licensees. In the case, Medtronic Inv. v. Mirowski Family Ventures, the Court held that a patent holder has the burden of proving infringement in a declaratory judgment action brought by a licensee.

The case was based on an arrangement in which Mirowski Family Ventures held several patents relating to implantable heart stimulators. Medtronic was party to a license agreement with Mirowski, as Medtronic was successor in interest to the original licensee (Eli Lilly). The agreement gave Medtronic a license to produce certain products under the patents in exchange for royalty payments. The agreement also included a procedure for bringing new products under the license. Specifically, if Mirowski notified Medtronic that a new product was infringing any of the patents, Medtronic could either cure the infringement by paying royalties or challenge the infringement by filing a declaratory judgment action.

The dispute arose when Mirowski notified Medtronic that seven new products infringed the Mirowski patents. Medtronic disagreed and brought an action for declaratory judgment of non-infringement. Ordinarily, in any patent infringement dispute, the patent holder bears the burden of proof of infringement. However, the lower court (the Federal Circuit) held that where the dispute is one between a licensor and licensee, the burden of persuasion shifts to the licensee (to prove non-infringement) if the licensee brings a declaratory judgment action.

In its opinion of the appeal from the Federal Circuit decision, the Supreme Court provided a very concise summary of the question and its conclusion:

We now turn to the question presented. A patent licensee paying royalties into an escrow account under a patent licensing agreement seeks a declaratory judgment that some of its products are not covered by or do not infringe the patent, and that it therefore does not owe royalties for those products. In that suit, who bears the burden of proof, or, to be more precise, the burden of persuasion? Must the patentee prove infringement or must the licensee prove noninfringement? In our view, the burden of persuasion is with the patentee, just as it would be had the patentee brought an infringement suit.

Thus, in a unanimous opinion, the Court reversed the decision of the Federal Circuit.

An implication of the decision is that patent licensors should be cautious when accusing licensees of patent infringement, whether the accusation is based on non-payment of royalties or on the sale of non-licensed products. Accusations of infringement could result in a declaratory judgment action by the licensee. If the declaratory judgment action involves only the patents and not the license agreement, the licensee may be able to select the venue for the declaratory judgment action.

Because of this, patent holders may wish to consider certain changes to their typical license agreements.  For example, if a choice of venue clause refers only to disputes under the agreement, disputes regarding unlicensed products could be considered to fall outside of the agreement. So, a patent holder may consider bringing any disputes relating to the licensed patents into the choice of venue clause.  This could limit the locations in which the licensee can bring a declaratory judgment action, and perhaps make it more inconvenient for the licensee to do so.

However, the extent to which a patent holder can place other limits on declaratory judgment actions is not as clear. For example, the licensor could include a clause that permits termination of the license agreement if the licensee brings a declaratory judgment action. Whether such a clause will be upheld on public policy grounds has been questioned by a number of commentators after cases such as MedImmune v. Genentech.  Until such clauses are definitively upheld or struck down many patent holders are including such clauses to provide an extra degree of protection in licensing arrangements.

Licensing tips: which entity is the licensee?

When licensing a patent, software or other intellectual property, it’s critical for the licensee to ensure that the license covers all entities who will use the IP.  This may include the licensee’s parent company, subsidiaries, other affiliates, customers or other entities.

The license grant clause, along with the definitions of “licensee” and (if included in the license) “affiliate” will typically govern the entities who may take advantage of a license. Unless the agreement specifically calls out an entity, that entity may not be able to take advantage of the license, whether as a licensee or (depending on the nature of IP involved) as a sublicensee.

A recent court decision from the Central District of California illustrates how the definitions will typically control the scope of a license. In the case, nQueue Inc. v. Control Systems (USA) Inc., nQueue filed a patent infringement suit against Control Systems. In defense, Control Systems argued that it was covered by a license that nQueue granted to Control Systems’ ultimate parent company, Equitrac Corporation. Continue reading

Shop Rights: What are they and can they be assigned?

“Shop rights” arise when an employee uses an employer’s resources to create an invention, but the employer does not own the invention. A shop right permits the employer to use a patented invention for its own business as a quid pro quo when the inventor used the employer’s resources to develop the invention.

The concept of a shop right is not found in any law.  Instead, it is a judicial creation that grew out of equitable principles. Because of this, shop rights are fact-specific. When determining whether a shop right exists in a particular situation, a court will consider several factors to determine whether equity and fairness should entitle the employer to use the invention without paying a royalty.  These factors include Continue reading

Let’s Keep it a Secret

On June 6, 2013, I had the opportunity to attend a spirited panel discussion about trade secrets.  The session, titled “Let’s Keep it a Secret:  Protecting, Valuing and Licensing Trade Secrets,” was hosted by the New York City Chapter of the Licensing Executives Society and Fox Rothschild LLP.  The panel and audience of licensing professionals debated issues ranging from “why treat trade secrets differently from any other confidential information,” to “how can you make money licensing trade secrets?”

Moderated by patent and licensing attorney Janet MacLeod, Ph.D  of Fox Rothschild, the panelists included:

Moderator Janet MacLeod started the discussion by asking whether the recent media and court attacks on software patents and gene patents could make trade secrets even more valuable.  With the panelists generally agreeing that the answer was “yes,”, tips from the panelists included: Continue reading

IAM Patent 1000 published – 2013 edition

Intellectual Asset Management (IAM) magazine has released the IAM Patent 1000:  The World’s Leading Patent  Practitioners 2013.  Each year, IAM surveys its readers and asks them to recommend patent litigation, licensing, and prosecution attorneys for inclusion in the list.  According to IAM:

When it comes to obtaining, enforcing and monetising these vital commodities, private practice lawyers and patent attorneys play an essential role; selecting the right specialist is of paramount importance. The IAM Patent 1000 delivers the most in-depth coverage of the market yet undertaken, pinpointing the best of the best in prosecution, litigation and licensing. The listings and editorial provide readers with a truly comprehensive overview of patent services around the world, making the IAM Patent 1000 an essential tool for all IP decision makers

The IAM Patent 1000 is available on the IAM website to registered users via this link.   I am honored that IAM named me to its lists for both patent licensing and patent prosecution for the second consecutive year.

New house and senate bills, and White House memo, call for open public access to publications and data resulting from federally funded research

If a new White House memo directing government agencies to ensure that publications and data resulting from federally funded research seems familiar, that’s because it nearly matches a new bill that was introduced in the House and Senate just a week earlier.

On February 22, 2013, the White House’s Office of Science and Technology Policy issued a memo directing U.S. government agencies who annually fund over $100 million in research to implement a plan for requiring public access to data and publications resulting from that research.

The memo requires that each plan included elements for: Continue reading

Getting to “Yes” in University IP Licensing

Are you thinking about licensing technology from a university or research institution?  Are you a research institution licensing professional looking for tips about negotiating with both start-ups and established companies?

If so, you’ll want to sign up for a “Getting to ‘Yes’ in University IP Licensing,” a live webinar sponsored by Technology Transfer Tactics magazine on October 25, 2012.  During the session, my colleague Brienne Terril and I will cover topics such as:

  • Anatomy of a license agreement
  • Common sticking points, and strategies for overcoming them quickly
  • How to balance competing interests of the researcher, institution, and the corporate licensee

We will illustrate several of the topics with a mock negotiation session, to help attendees see various negotiation tactics in the tech transfer context.

More information about the webinar is linked here at the Technology Transfer Tactics website.

Court: Patent license extends to continuation patents unless the agreement expressly says otherwise

In another case highlighting why it’s important for license agreements to clearly describe the parties’ intent, the U.S. District Court for the Southern District of New York recently considered a situation where a patent holder granted a third party (licensee) a covenant not to sue under certain patents.  The patent holder later obtained additional patents that were related to the licensed patents as continuations.  In the suit, the patent holder sued the licensee for infringement of the new patents.

The court ruled that the patent holder was not justified in bringing the suit, as the agreement did not expressly exclude continuation patents from the scope of the license.  The court relied on the Federal Circuit’s 2011 decision in Gen. Protecht Group, Inc. v. Leviton Mfg. Co., Inc., which held that “where, as here, continuations issue from parent patents that previously have been licensed as to certain products, it may be presumed that, absent a clear indication of mutual intent to the contrary, those products are impliedly licensed under the continuations as well.”

The S.D.N.Y decision is ICOS Vision Systems N.V. v. Scanner Technologies Corporation, No. 1-10-cv-00604 (S.D.N.Y. Feb. 15, 2012)

Will Twitter’s new “Innovator’s Patent Agreement” be the GPL of patent licensing?

The week Twitter announced a new policy under which it will obtain patent assignments from its employee-inventors.  Unlike most employee invention assignment agreements, in which the employee is required to assign inventions to the employer without restriction as a condition of employment, Twitter’s new policy will restrict what the company can do with the assigned inventions. According to Twitter’s announcement:

It is a commitment from Twitter to our employees that patents can only be used for defensive purposes. We will not use the patents from employees’ inventions in offensive litigation without their permission. What’s more, this control flows with the patents, so if we sold them to others, they could only use them as the inventor intended.

On this basis, Twitter has rolled out what it calls the Innovator’s Patent Agreement (IPA).  Under the IPA,  Twitter agrees that it will not assert Continue reading

Court rules that copyright “first sale” doctrine does not apply to pre-installed software that was licensed to OEMs

In United States copyright law, the “first sale” doctrine allows the purchaser of a lawfully-made copy of a copyrighted work to  transfer the copy by a subsequent sale, rental, or other means.  The first sale doctrine originated in a 1908 Supreme Court decision, and it is codified at 17 U.S.C. 109(d).

In a recent decision from the U.S. District Court for the Northern District of California, the court ruled that the first sale doctrine did not apply to copies of software that are pre-installed on a computer and sold by the original equipment manufacturer with the computer itself.  In Adobe Systems v Hoops Enterprise LLC (N.D. Cal. Feb. 1, 2012), the court considered the case of a company that bought computer hardware from Dell and Hewlett-Packard and resold OEM-installed Adobe software on eBay, separate and apart from the hardware.

The court indicated that the key question was whether the Adobe software was sold or licensed to the OEM computer manufacturers.  If it were a sale, then the first sale doctrine could apply.  However, if it were a license, then the first sale doctrine would not apply based on the precedent of Vernor v. Autodesk, Inc. (9th Cir. 2010).

Adobe did enter into license agreements with the OEMs, but the defendants argued that those agreements did not create significant restrictions on transfer, nor did they impose notable use restrictions, and Adobe did not retain sufficient control over the copies, so the agreements were effectively sale agreements rather than license agreements.  The court disagreed, noting that there were “significant distribution restrictions” in the license agreements.